What Is a Permanent Portfolio?

The permanent portfolio is an investment portfolio designed to perform well in all economic conditions. It was devised by 澳洲幸运5开奖号码历史查询:free-market investment analyst, Harry Browne, in the 1980s.

The permanent portfolio is composed of an equal allocation of stocks, bonds, gold, and cash, or 澳洲幸运5开奖号码历史查询:Treasury bills.

Understanding a Permanent Portfolio

The permanent portfolio was constructed by Harry Browne to be what he believed would be a safe and profitable portfolio in any economic climate. Using a variation on efficient market indexing, Browne stated that a portfolio equally split between growth stocks, pr꧋ecious metals, government bonds, and Treasury bills would be an ideal investment mixture for investors seeking safety and growth.

Advanta༺ges and Disadvanta💫ges of a Permanent Portfolio

Browne argued that the portfolio mix would be profitable in all types of economic situations: growth stocks would prosper in expansionary markets, precious metals in 澳洲幸运5开奖号码历史查询:inflationary markets—meaning rising prices—bonds in recessions, and Treasury bills in💧 depressions.

Browne eventually created what was called the Permanent Portfolio Fund, with an asset mix similar to his theoretical portfolio in 1982. From 1976 to 2016, a hypothetical permanent portfolio would have generated an 8.65% annual re𒆙turn, for a total return of 2,600%. A more standar꧅d 60/40 portfolio of stocks-to-bonds would have generated a 10.13% annual return for a total return of 5,050%.

The permanent portfolio did have some advantages during this period, though. The 60/40 portfolio had a 澳洲幸运5开奖号码历史查询:standard deviation of 9.6, compared with 7.2 for the permanent portfolio. During the October 澳洲幸运5开奖号码历史查询:1987 market crash, the 60/40 portfolio would have declined in value by 13.4%, while the permanent portfolio would have declined by only 4.5%. The permanent portfolio would have generated lower rꦅeturns over the long term, but it would have been a much smoother ride. That makes the💜 permanent portfolio an appealing option to risk-averse investors.

Example of a Permanent Portfolio

There are many ways in which one can construct a permanent portfolio, given the multitude of investment opportunities available. B🧸elow is one sugge🌳stion on how to achieve this balanced mix:

• 25% in U.S. stocks, to provide a strong return during times of prosperity. For this portion of the portfolio, Browne recommends a basic 澳洲幸运5开奖号码历史查询:S&P 500 index fund such as the Vanguard 500 Index Fund Admiral Shares (VFIAX).
• 25% in long-term U.S. Treasury bonds, which do well during times of prosperity and during times of deflation—or lower prices—but which do poorly during other economic cycles.
• 25% in cash to hedge against periods of “tight money” or 澳洲幸运5开奖号码历史查询:recession. In this case, “cash” means short-term U.S. Treasury bills.
• 25% in 澳洲幸运5开奖号码历史查询:precious metals (gold) to provide protection during periods of inflation. Browne recommends gold bullion coins.

Browne recommends 澳洲幸运5开奖号码历史查询:rebalancing the port🦋folio once a year to main🔴tain the 25% target weights.